By the authority vested in me as President by the Constitution and the
laws of the United States of America, and in order to guarantee the division
of governmental responsibilities, embodied in the Constitution, between
the Federal Government and the States that was intended by the Framers
and application of those principles by the Executive departments and agencies
in the formulation and implementation of policies, it is hereby ordered
as follows:

Section 1. Definitions. For purposes of this order:

(a) "State" or "States" refer
to the States of the United States of America, individually or
collectively, and, where relevant, to State governments, including units
of local government and other political subdivisions established by the
States.

(b) "Policies that have federalism
implications" refers to Federal regulations, proposed
legislation, and other policy statements or actions that have substantial,
direct effects on the States or on the relationship, or the distribution
of power and responsibilities, between the Federal Government and the States.

(c) "Agency" means any authority
of the United States that is an "agency" under 44 U.S.C.
3502(l), other than those considered to be independent regulatory agencies,
as defined in 44
U.S.C. 3502(5).

Sec. 2. Fundamental Federalism Participles In formulating and
implementing policies that have federalism implications, agencies shall
be guided by the following fundamental federalism principles:

(a) The structure of government
established by the Constitution is premised upon a system
of checks and balances.

(b) The Constitution created
a Federal Government of supreme, but limited, powers. The
sovereign powers not granted to the Federal Government are reserved to
the people or to the
States, unless prohibited to the States by the Constitution.

(c) Federalism reflects the
principle that dividing power between the Federal Government
and the States serves to protect individual liberty. Preserving State
authority provides an essential balance to the power of the Federal Government,
while preserving the supremacy of Federal law provides an essential balance
to the power of the States.

(d) The people of the States
are at liberty, subject only to the limitations in the Constitution
itself or in Federal law, to define the moral, political, and legal character
of their lives.

(e) Our constitutional system
encourages a healthy diversity in the public policies adopted
by the people of the several States according to their own conditions,
needs, and desires. States and local governments are often uniquely
situated to discern the sentiments of the people and to govern accordingly.

(f) Effective public policy
is often achieved when there is competition among the several
States in the fashioning of different approaches to public policy issues.
The search for enlightened public policy is often furthered when individual
States and local governments are free to experiment with a variety of approaches
to public issues. Uniform, national approaches to public policy problems
can inhibit the creation of effective solutions to those problems.

(g) Policies of the Federal
Government should recognize the responsibility of-and should
encourage opportunities for-States, local governments, private associations,
neighborhoods,
families, and individuals to achieve personal, social, environmental, and
economic objectives
through cooperative effort.

Sec. 3. Federalism Policymaking Criteria. In addition to adhering
to the fundamental federalism principles set forth in section 2 of this
order, agencies shall adhere, to the extent permitted by law, to the following
criteria when formulating and implementing policies that have federalism
implications:

(a) There should be strict adherence
to constitutional principles. Agencies should closely
examine the constitutional and statutory authority supporting any Federal
action that would limit
the policymaking discretion of States and local governments, and should
carefully assess the
necessity for such action.

(b) Agencies may limit the policymaking
discretion of States and local governments only
after determining that there is constitutional and legal authority for
the action.

(c) With respect to Federal
statutes and regulations administered by States and local
governments, the Federal Government should grant States and local governments
the maximum administrative discretion Possible. Any Federal oversight
of such State and local administration should not unnecessarily intrude
on State and local discretion.

(d) It is important to recognize
the distinction between matters of national or multi-state
scope (which may justify Federal action) and matters that are merely common
to the States (which may not justify Federal action because individual
States, acting individually or together, may effectively deal with them).
Matters of national or multi-state scope that justify Federal action may
arise in a variety of circumstances, including.

(1) When the matter to be addressed
by Federal action occurs interstate as opposed to being contained within
one State's boundaries.

(2) When the source of the matter
to be addressed occurs in a State different from the State (or States)
where a significant amount of the harm occurs.

(3) When there is a need for
uniform national standards.

(4) When decentralization increases
the costs of government thus imposing additional
burdens on the taxpayer.

(5) When States have not adequately
protected individual rights and liberties.

(6) When States would be reluctant
to impose necessary regulations because of fears that
regulated business activity will relocate to other States.

(7) When placing regulatory
authority at the State or local level would undermine regulatory
goals because high costs or demands for specialized expertise will effectively
place the regulatory matter beyond the resources of State authorities.

(8) When the matter relates
to Federally owned or managed property or natural resources,
trust obligations, or international obligations.

(9) When the matter to be regulated
significantly or uniquely affects Indian tribal
governments.

Sec. 4. Consultation. (a) Each agency shall have an effective
process to permit elected officials and other representatives of State
and local governments to provide meaningful and timely input in the development
of regulatory policies that have federalism implications.

(b) To the extent practicable
and permitted by law, no agency shall promulgate any
regulation that is not required by statute, that has federalism implications,
and that imposes
substantial direct compliance costs on States and local governments, unless:

(1) funds necessary to pay the
direct costs incurred by the State or local government in
complying with the regulation are provided by the Federal Government; or

(2) the agency, prior to the
formal promulgation of the regulation,

(A) in a separately identified
portion of the preamble to the regulation as it is to be issued in
the Federal Register, provides to the Director of the Office of Management
and Budget a
description of the extent of the agency's prior consultation with representatives
of affected States and local governments, a summary of the nature of their
concerns, and the agency's position supporting the need to issue the regulation;
and

(B) makes available to the Director
of the Office of Management and Budget any written
communications submitted to the agency by States or local governments.

Sec. 5. Increasing Flexibility for State and Local Waivers.
(a) Agencies shall review the
processes under which States and local governments apply for waivers of
statutory and regulatory requirements and take appropriate steps to streamline
those processes.

(b) Each agency shall, to the
extent practicable and permitted by law, consider any
application by a State or local government for a waiver of statutory or
regulatory requirements in connection with any program administered by
that agency with a general view toward increasing opportunities for utilizing
flexible policy approaches at the State or local level in cases in which
the proposed waiver is consistent with applicable Federal policy objectives
and is otherwise appropriate.

(c) Each agency shall, to the
extent practicable and permitted by law, render a decision upon a complete
application for a waiver within 120 days of receipt of such application
by the agency. If the application for a waiver is not granted, the agency
shall provide the applicant with timely written notice of the decision
and the reasons therefor.

(d) This section applies only
to statutory or regulatory requirements that are discretionary
and subject to waiver by the agency.

Sec. 6. Independent Agencies. Independent regulatory agencies
are encouraged to comply with the provisions of this order.

Sec. 7. General Provisions. (a) This order is intended only
to improve the internal management of the executive branch and is not intended
to, and does not, create any right or benefit, substantive or procedural,
enforceable at law or equity by a party against the United States, its
agencies or instrumentalities, its officers or employees, or any other
person.

(b) This order shall supplement
but not supersede the requirements contained in Executive
Order 12866 ("Regulatory Planning and Review"), Executive Order 12988 ("Civil
justice
Reform"), and OMB Circular A-19.

(c) Executive Order 12612 of
October 26, 1987, and Executive Order 12875 of October 26,
1993, are revoked.

(d) The consultation and waiver
provisions in sections 4 and 5 of this order shall
complement the Executive order entitled, "Consultation and Coordination
with Indian Tribal
Governments," being issued on this day.

(e) This order shall be effective
90 days after the date of this order.